Yves here. Richard Murphy below sets forth some of the key factors that will preserve the central role of the dollar in trade, long beyond what many think ought to be its sell-by date.
To add to Murphy’s discussion: first, like Michael Hudson, he advocated Keynes’ bancor as a solution for the international/payment currency conundrum. The problem is that there is no way, no how bancor or anything like it will be adopted. The bancor system rests critically on mechanisms to punish nations that run persistent trade surpluses. Keynes saw trade surplus nations as destructive to international stability via mercantilist practices, such as setting currency prices unduly low and sucking demand and jobs from their trade partners. They also accumulate financial claims or domestic assets of the debtor nation, which can become a source of political friction.
Bancor thus requires participating states to give up sovereignity in support of these new arrangements. They must agree to revalue their currencies. Countries that run unduly large surpluses or deficits must also pay hefty penalties.
There is absolutely no way China will ever accept this. China sees its yawning trade surpluses as the result of hard work and investment. They are points of national pride as well as important in boosting employment and pay levels. So Murphy is incorrect in claiming that the dollar can be replaced by it or a similar scheme.
Second, Murphy mentions the importance of capital markets to a reserve currency. We have repeatedly pointed out that while bi-lateral trade mechanisms are very important as a way for participating states to evade dollar-based sanctions, they do not a new currency system make. Well under 10% of foreign exchange transactions are due to trade; the overwhelming majority are investment flows. And some of these are important for trade to work well, such as commodity and foreign exchange hedging.
This situation creates the conundrum that a country that has the reserve currency must not just run at least some trade deficits to get its currency widely held overseas. It must also have enough of a financial system to handle the capital markets activity, which risks the economy being finanicialized, and eschew capital controls. While some commentators have claimed that China’s posture vis-a-vis BRICS new currency/new payment architecture point to it wanting a system organized around the yuan, it does not yet appear ready to accept the related burdens and risks.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
Is the US dollar losing the trust required of a global reserve currency?
The dollar isn’t just America’s currency. It is the plumbing of global trade—the world’s settlement mechanism, safe haven, and store of value. But Trump’s tariff agenda, political interference in the Federal Reserve, and broader institutional instability are changing how the rest of the world assesses US credibility.
This video explains:
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Why reserve currencies depend on trust, not “strength”
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Why the US deficit is not an accident but a structural feature of the system
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Why one-currency global trade has become fragile
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What Keynes proposed instead: the bancor
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Why the BRICS alternatives don’t solve the core design problem
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Why the IMF / World Bank have failed to lead reform
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Why we now need a neutral clearing system for global trade
The question is not “does the dollar collapse tomorrow?”
It’s whether the world should keep accepting a reserve system built around one national currency—and one increasingly erratic politics.
This is the audio version:
This is the transcript:
Is the dollar failing? The US dollar is the world’s reserve currency. It has been since the end of the Second World War. It’s fundamental to the way in which the world economy works as a consequence, but let’s be honest, we know that the dollar is at risk.
Donald Trump’s tariff policy has created risk about the status of trade with the USA.
His attack on the US Federal Reserve, right or wrong – it makes no difference – is creating uncertainty about the management of the dollar and, as a consequence, there is a sense of uncertainty around the world about what might happen if the dollar fails.
The question comes up: what could we do instead? And in that context, it’s important to recall that just after the end of the Second World War, John Maynard Keynes, Lord Keynes, as he was by then, proposed something instead as the world’s reserve currency. He proposed something he called the bancor, it’s spelt B-A-N-C-O-R, and that was going to be the thing that would deliver, in his opinion, stability in world trade. Has the time now come when we need to look at the bancor again?
The dollar, let’s remember, is more than a currency. It is the plumbing of global trade. It is the global store of value, and it has been how crises are managed. ” In doubt? Buy the dollar.” Was the mantra, and it worked, but now confidence in the dollar is being shaken, and for good reason: Donald Trump is doing that deliberately.
But let’s also be clear, there isn’t going to be a collapse in the US dollar tomorrow. That’s just not going to happen. People still need the dollar. They’re still going to buy the dollar. They’ve still got debts denominated in dollars, and the dollar does provide the world with its liquidity.
So, the question we’re talking about here is not about an immediate crisis because I can’t see that happening. Even if the Federal Reserve does lose its battle with the US government, I don’t think everything is going to tip over tomorrow. Instead, what we’re talking about is an issue of long-term trust, and trust in US institutions is falling, for very obvious reasons.
They’re being badly managed, their governance is failing, and Trump is trying to undermine the whole credibility of the US government, and there is real doubt about whether any future president will be able to restore that, and Trump most definitely won’t be able to do so.
In that case, trust is the key word here because trust is what a reserve currency requires, and trust in the dollar is falling. But the world does still need a reserve currency. It does need the liquidity that, at present, the dollar provides, and which the US literally creates by running perpetual deficits, which supply the world with the money supply that it needs.
To pretend that the US deficit is some form of accident is, in this case, nonsense. The US has to run a deficit, or the world comes to a halt right now, and that is what has created global dependency on the USA and, simultaneously, political resentment, both inside and outside the US. It is this that has helped create the instability within US politics, which is now giving rise to the policy shifts which lead to the question: Is the dollar going to lose its dominance?
My point is already clear: no, not overnight. But, and this is key, the question mark is there. Whilst the IMF is showing that the dominance is being maintained at present, its statistics clearly indicate that there is no short-term threat to dollar hegemony, the fact is that diversification is happening at the margins.
The key issue isn’t collapse then, it’s the fragility that is now built into a one-currency world system of trade when the currency is created by a country that is clearly indicated it doesn’t believe in trade anymore, and that’s why we need to go back to Keynes.
That’s why we need to look at what he suggested as the alternative to the dollar way back in the middle of the Second World War, in the negotiations that ended when the Bretton Woods agreement was concluded about how the architecture of the world’s financial systems would be created post the end of the conflict in 1945.
Keynes thought that global trade needed a global mechanism, and it did not, in his opinion, require dependence on one national currency. He lost that argument, but he put forward the claim that we should not have the dollar; we should have what he called the bancor.
Now, the bancor was not a currency in the way that you are used to it. In fact, it would never have been issued for use by anyone in any country. It was only going to be a currency for use for the settlement of international debts. It was a clearing mechanism, and this is something that we should be used to if we have familiarity with money now. What he was creating was a form of central bank-created money.
We do have central bank-created money in every currency around the world right now. It’s the money that the Bank of England creates for the clearing banks in the UK, which is distinct and different from the money that they create for use by us, their customers. And he was creating a central bank currency for use so that countries could pay each other through a central bank clearing system. Now, that makes it harder to understand than a normal currency because we would never see the bancor in use, but it is a system for settlement and not a gimmick, and that is critical.
What Keynes saw was that there were persistent surpluses being run by some countries in the world and persistent deficits by others. Now, which countries have run surpluses and which have run deficits have changed since then, but the point is that they create pressure both ways. There is an inherent instability in a world system where some countries always run deficits, and some always run surpluses, because resentment can arise, and the bancor was designed to create pressure on both sides of this equation to try to create a balanced system of world trade.
The goal was fairness and stability without necessarily requiring unity of systems at all times, and most definitely not necessarily balance in the short term.
But there was a problem. Keynes was negotiating in 1945 from a position of weakness. Britain might have been very early into the war, but as a consequence, it was, of course, heavily indebted by the time the war was over, and the US held the power. It had the dollar, and it had gold. 75% of all gold reserves, in fact, in the world at that time, and the US preferred a dollar-centred system, and so Keynes’s argument for bancor were lost. The US person present at the negotiations, Harry White, won; the dollar became the system that we now use. But the point is, it was a choice, and that’s incredibly important to note. This happened because of a choice; the dollar could be replaced by choice as well, that’s why I make this point.
Now, the dollar was reinforced in its position because once the Bretton Woods logic was put into action, the International Monetary Fund and the World Bank reinforced the dollar’s hegemony. They reinforced the idea that the dollar was anchored to gold. They encouraged the idea up until the early 1970s that other currencies were pegged by exchange rate to the dollar, and they created what, therefore, looked like a stable currency system for the world. And it was, until it wasn’t, and it wasn’t from 1971 onwards.
Global trade grew faster than gold supply did. That therefore created credit crises within this system, and US deficits mounted.
The credibility of the gold link within that currency was eroded as a consequence, and in 1971, when the French did, in effect, say to Richard Nixon as president of the USA, that they wanted their gold back from the US, he changed the world order by saying, “The US dollar was now no longer linked to gold,” and that was the end of the matter, France couldn’t have its gold. Convertibility was no longer possible, but dollar dominance remained, but now in an unmanaged state.
The system that existed from 1946 to 1971 was over, and now the situation moved into a new era. Trade imbalances became structural. Exporters began to hoard foreign currency reserves. Deficit countries were forced to deflate demand within their countries to try to manage the deficits that they were running and the floating exchange rates that they were managing, and global growth became dependent, fundamentally, on US consumers continuing to literally live beyond their means because as a consequence, they created the deficits, which kept the world’s liquidity going.
This was all an economic design flaw. It wasn’t chosen. It happened, and in a sense, it was a mistake, and now we can see the consequence. Global instability is intensifying. US politics are becoming increasingly erratic. Monetary policy independence is being contested, and to an extent, rightly so, and markets are noticing safe haven behaviour is developing: the price of gold and silver is rising. This is exactly what reserve systems cannot tolerate, and we are in a situation where the pressure on reserve systems is reaching breaking point.
So what we have to say is, what do we do next? Now, one of the answers has been put forward by what are called the BRICS countries. They are Brazil, Russia, India, and China. They say they’d create their own reserve currency to trade in and ignore the dollar, and I get the point that they’re making. They don’t want to be dependent upon the dollar, and why should anyone else? But the difficulty is, at present, they can’t provide the deep capital markets that a reserve currency requires. Nor in all cases are they completely committed to the rule of law, and they need to be if they’re going to truly provide a reserve currency, and they don’t have scalability or reliability or, at present, credibility with regard to governance. As a result, whilst the BRICS currency idea is a good one, it isn’t a solution. What we need is a world institution to manage a new reserve currency.
Could that be the bancor? My suggestion is that it could. The precise benefit of this is that it is a neutral clearing unit and is not nationally based. It would be issued by an international institution, although this, I would suggest, would require that the World Bank or IMF, or some other organisation, to create it would have to move out of the US, and not be dependent upon US power, and it must be then used for the settlement of balances. It could be linked to a basket of other currencies or commodities, and also, interestingly, the value could be linked to carbon constraints. In other words, there could be an opportunity to link the value of a country’s contribution to this basket of currencies, depending on its commitment to tackling the climate crisis that we have.
All of this makes it a policy instrument as well as a reserve currency, and this is important because Keynes did not have to consider such issues in 1946, but I suspect that if he had been alive today, he would have done. Today, we do face climate breakdown. We do face resource limits. We do face fragile supply chains, and we do face financialised speculation in a way that Keynes quite clearly condemned. So any new system of reserve currency has to be able to manage all those issues whilst providing a mechanism for exchange and clearance for world trade. This is the challenge that we face.
But, we also have to face another challenge, and that is, why, at this moment, when we so obviously need something better than the dollar, is no one talking about what I’ve just been talking about, the need for a new reserve currency?
Are the IMF and World Bank not talking about this?
Why are they locked into orthodoxy?
Why are they defending the existing order when it is clearly failing?
Why aren’t they disciplining countries that clearly need to be brought into line in the world’s international trading system?
And why aren’t they also disciplining surplus countries, who should, in fact, be spending those surpluses into use because they are creating instability as much as any country that is running a deficit? After all, every deficit requires there to be a surplus. This is double-entry bookkeeping at work.
Why is all of that not happening? Because they’re avoiding political confrontation with the USA. That’s why I say these institutions have to move out of the USA, because if the USA is creating this problem, the world has to be able to challenge the US, or the problems can’t be solved. We will be dragged down by the USA if we don’t say what it is doing is wrong.
We also need, therefore, to look at the location where any such currency could be based, and the obvious answer right now is either within an EU country or at least within a G7 country. Canada may be uncomfortably close to the USA, but we don’t necessarily require it to be in Europe either. The point is, we do need a place where there is stability, and that requires a country to be willing to stand up and say it will host this new settlement system that will not be dependent upon its currency, but to which it will lend the credibility of its systems, its system of law, and its ability to maintain good governance. That’s because we need to have stability, and that’s precisely because instability costs everyone a great deal.
Europe does need this, and if it isn’t going to speak out for it and even ask to create this system, then its apparent neutrality is in fact its complicity in chaos.
So we need to look at this. This is a question that cannot be avoided now. At some time, this problem is going to get worse than it is already.
We’re going to see more currency volatility.
We’re going to see bigger financial shocks transmitted globally.
We’re going to see more destabilising capital flows than we are already getting now, and they are becoming worse.
We’re going to see more austerity in vulnerable countries as a consequence of those flows.
And we’re going to see more global resentment and fragmentation, and that is a price that we cannot afford to pay.
So Keynes offered us a system designed for stability. The dollar system is not designed for that, and it is clearly showing now. In a world of instability, we need to look at alternatives. This, then, is the moment to reopen discussion on bancor. Why aren’t we doing it is the question we have to ask, when stability is a public good, reserve currencies are political choices, global money design affects real lives, and a fair system requires care, investment, and support for its survival? It’s time to demand debate. It’s time for change. It’s time for the world to wake up and realise the day of the dollar is over.
I wish Richard Murphy discussed Special Drawing Rights (XDRs), because that framework, while not like the Bancor, is one that has provided similar functionality like one during times when dollars weren’t attractive or available as a reserve currency. Addressing the advantages and disadvantages of that system, as well as why China promoted reform in the XDR system after the 2008 financial crisis, would help in finding a solution to the related problems of dollar dominance and Triffin dilemma.
I believe that the focus on the USD is arguably misplaced. The real story is the shift taking place amongst Central Banks from U.S. Treasuries, to holding gold as a reserve asset. Luke Gromen, who has been predicting such a shift for years, had this to say on the topic in October:
No doubt, but can gold fully replace the role of USD and USD denominated assets?
That claim is unproven. To be a true reserve asset, you need to be willing to sell it to defend your currency in a crisis. The big reason gold is looming so large in central bank reserves is its price runup, which contrary to widely propagated dodgy analysis, is not the result of central bank action. The opener of a discussion:
https://robinjbrooks.substack.com/p/debunking-the-myth-of-central-bank
I love it when you take down a “common sense” economic claim (that I was agreeing with) with some actual data taken from a source that I would not normally be checking out. That’s why this is the best blog out there. Kudos.
Yes, the dollar may not be going to be dethroned any time soon, but it sure is losing value fast. Au at $4600 and silver nudging $100
Huge line at lunch time at the local coin shop of folks selling…..
Given that central banks are by far the biggest buyers of gold bullion, and that they have increased the level of their buying significantly in recent years, I fail to see how they might not be considered one of the meaningful drivers of the price escalation.
I have no subscription to the author of the article which you excerpted, but he was attempting to “debunk” a chart that was solely based on EM central banks. Surely that is a very limited piece of the overall puzzle.
As for the reserves somehow being misleading due to the rapid rise in prices, that strikes me as a dubious argument, based on the assumption that prices will be substantially lower in the future. What if they were to maintain, or well exceed their current levels? In what sense, then, might the value of those reserves be misleading?
I can’t testify to the veracity of this c2021 cube graphic but it gives one reason to seriously doubt that central bank gold purchases are the main source of gold price pressure.
In short, CB’s hold ~17% (of above ground gold), while private holdings hold >~75%.
It seems more likely to me that spooked (and agile) private entities are running for gold cover due their realised exposure to weaponised USD assets and volatile tariff/exch rate Trumpery.
You equate amounts held with acquisitions over recent years?
The CBs of Russia and China have been replacing USTs with gold with increasing tempo, and in large amounts.
There is the thing that China and Russia are also the two biggest gold producers in the world. They just don’t buy it, they dig it from the ground like no-one else does.
700 tonnes per year between the two. If gold wasn’t so soft a metal Russia could make about a 1000 T-90 tanks out of it per year.
@ Tinky 08:04pm: No, I’m not directly equating acquisitions with holdings; merely suggesting that by weight of the math numbers it is very improbable that those holding a 17% portion of the gold stock ‘pie’ could effect sufficient demand to raise the world gold price ~150% (2021 to 2026 price increase) … and while so doing, only lift aggregate world CB physical gold holdings 5% (35,000 tonnes 2021 to 36,700 tonnes 2025).
Those ‘private’ holders of 83% of world above ground gold stock (~244,000 tonnes) need exert only a relatively moderate demand increase to effect such a global price escalation.
@dunkey2830
Thanks for the elaboration. I think that you are missing two crucial points.
First, the overall percentages of gold held by various entities is a very poor metric to use. Morgan Stanley estimated India’s private sector to hold over 34,000 tonnes, but that gold was acquired and held over centuries. What is held by CBs, as a percentage total of the above-ground gold, is not the important point, as over the past 100 years, and especially the past ~6, they have been by far the largest buyers.
Secondly, I would say that you are either failing to take into account, or grossly underestimating the role that CBs play in catalyzing others in the private sectors to acquire bullion. I began to acquire it after I saw how the U.S. was (mis)handling the 2008 crisis, in large part because I deduced that CBs would print like crazy, and devalue their currencies in efforts to avoid debt crises. Then, after COVID, and the huge additional sums printed, it became clear to most major CBs that more gold would be needed on their balance sheets. I’m quite certain that for every ton purchased by a CB, there were increasing, related updrafts in the retail markets.
@Tinky 11:01am
The 2 ‘crucial points’ you say I miss are actually the crux of my contention:-
1. That ‘spooked’ private gold buyers are driving the gold price hikes;
and
2. That gross mismanagement of US monetary system by successive US govts. post Bretton Woods is the catalyst – foreign CB’s & private investors fleeing USD assets to gold is the reaction.
Your assertion “…over the past 100 years, and especially the past ~6, they have [CB’s] been by far the largest buyers…”
is not substantiated by the available historical evidence here, and here . It is demonstrably incorrect.
Private holdings of above ground gold has always exceeded official CB holdings (refer graphs at above links) – and furthermore the rate of increase of private holdings, particularly since the 1950’s, greatly exceeds rate of CB ‘official’ acquisitions – from which one must conclude, on the data, that private buyers are the largest aggregate buyers in the gold market.
Your contention in initial post (Jan 16, 2026 at 12:21pm) stated..
“..I believe that the focus on the USD is arguably misplaced. The real story is the shift taking place amongst Central Banks from U.S. Treasuries, to holding gold as a reserve asset..”
While in reply above (11:01am) you state:-
“…you are either failing to take into account, or grossly underestimating the role that CBs play in catalyzing others in the private sectors to acquire bullion.”
Which is it that is driving the gold price? The globally perceived insecurity of holding mismanaged/weaponised USD assets or CB’s shifting from US Treasuries to gold?
… and then there’s..
“…I deduced that CBs would print like crazy, and devalue their currencies in efforts to avoid debt crises..”. & “more gold would be needed on their balance sheets”.
A whole nother discussion that could be had.
Recently it was reported that a Chinese Chinese bond offering of $6Billion was oversubscribed by a factor of 30 ($118 Billion) by international investors. This in spite of carrying a lower interest rate than that of the U.S. paper. It was opined that investors chose safety and predictability over the turmoil of Trump tariffs and mismanagement.
I am wondering if it will ever be possible for the world to get on without any reserve currency? I really don’t know how possible that would be in this day and age…. But the world did exist without one for a long time (well, maybe gold was the equivalent back in the day?)
This is likely a very dumb question and I do humbly apologize, I am just actually curious. Do some of Dr. Hudson’s books talk about this and can anyone recommend good sources for a newbie to historic currency and trade regimes?
Of course, we could get along without a ‘reserve’ currency, because there are plenty of ways of buying and selling that don’t require a specific currency – or more importantly, there are plenty of ways of settling trade that don’t require a specific currency.
BRICS+ is showing this to us very clearly.
A reserve currency is merely a convenience, but once weaponised, becomes a liability – hence it’s dumping.
I have no idea when the dollar ‘reserve currency’ may collapse. But I do know that is becoming worth less by the day.
Conundrum indeed. I agree that on paper the bancor concept makes sense, but as Yves points out, there is no way that China, for example, will agree to that now. In 1944/45 bancor was totally unacceptable to the US., but the landscape is totally different now, with “path dependency” and entrenched institutions offer no real alternative.
The bottom line from article: “… Because they’re avoiding political confrontation with the USA…”
To make matters worse, our Neo-Caligula is an irrational, reckless and lawless actor who will use sanctions (siege warfare) tariffs, kidnap or assassinate leaders, and/or drop bombs to coerce other nations to do as they are told. There is no international order in order to create an alternative system. (Accept the dollar, or get laid to waste)
If we are lucky, after Caligula is gone, more rational actors will emerge to at least try to sort out the conundrum. Not to sound melodramatic, but that is, if we survive that long.
We will get more clarity on the way things will go as the undeclared warfare that is going on around the world keeps spreading. Eventually we will be back to two armed camps only trading necessities with each other similar to the cold war but much intensified due to Chinese industrial strength.
Blocks may end up settling their affairs between each other like in war time with barter mainly and the occasional physical shipment of gold. Much depends if economic growth has really ended now due to material shortages and excessive population. Fiat currencies don’t care but the collateral behind them is mostly interest bearing and how do you generally pay interest if there is degrowth by necessity ?
A brave new world awaits us off world since the empire is a financial empire now with an airforce attached and as the empire goes the dollar will follow.
The fate of the dollar is a tricky business, but so long as it used as a general money of account in international transactions I find it hard to believe that it’ll get ditched any time soon. Too many problems using bilateral schemes, which often turn into money-managed barter (as with the problem between Russia and India). There is a bit of a harebrained scheme that could, in principle, work in replacing the dollar without actually replacing the dollar: turning it into something like a Medieval “imaginary money”, and having an institution simply “crying up or down” the value of certain currencies as regards to the imaginary dollar. With sufficient dollar reserves and purchasing power, I think it could be done; though it would take a lot of political muscle which doesn’t seem feasible.
I think you’re overstating the degree to which the Chinese would be the main opponents of a modern bancor. It isn’t going to happen anyway without the US onboard, which to me implies that the only way it is going to happen is with a major political change in the US, aka something like an American president pushing the proposal as a high priority. In that scenario, you could imagine that fundamentally this would be a negotiation between the US and the Chinese, the worlds main importers and exporters respectively. If done right, both parties could very clearly benefit in the long run. There would certain points of concern by the Chinese as exporters, but ultimately those could be negotiated away, both by the US making certain geopolitical concessions, and more general concessions in the bancor structure like staged implementation.
Very good article that makes some points I agree with and a couple that I have trouble with. I agree that Keynes understood the fragility of capitalism and how markets don’t adjust naturally or easily. This leads to long term trade deficits or surpluses creating economic instability, which means political instability as well. Every time I read Keynes I hear him talk about the need for balanced trade – whether he states it explicitly or relies on it implicitly for an argument to hold.
I have trouble with the conclusion that the world needs a reserve currency and that the owner of that currency has to run trade deficits in order for the world economy to function. I agree with the writer that the US wanted to be the reserve currency and that is pretty much why it is the reserve currency. The US dominates every international organization it belongs to, having the dominant currency is just another aspect of it.
The US has run trade deficits for over 50 consecutive years. It runs trade deficits for a number of reasons that are all inter-related. One reason is direct foreign investments, a second is lack of competitiveness and a third is deindustrialization.
When a country invests in another it does so to get a return on its investment and depending on the situation a repayment of the initial amount. That means the receiving country has to pay the investor, which means it has to sell more than it buys – leading to net exports. For the investing country, the investment often starts as an export and if the enterprise is profitable, it ends with that country importing more than it exported.
To my recollection, the US is the first country to encourage deindustrialization. Many companies based in the US had branch plants all over the world. A profit maximizing company would notice that some plants were more cost effective than others and it just made sense to produce where it was cheaper and export back to the US or other countries. The next, easier, step was to make the inputs offshore as well. An even easier next step was to close factories in the home country, ship the equipment offshore and produce over there. The whole thing was sold as needing to compete with foreigners and keep the home economy strong. Meanwhile at the policy level, there was no talk of tariffs – only the talk of free trade and its benefits.
When the US was the manufacturing workshop of the world, countries would borrow US dollars from US financial institutions so they could buy US goods – that made it a de facto reserve currency. That might still be the case if the rest of the world had the same progression in the standard of living for its working people as the US had during its industrial rise. Now the US is the debtor nation of the world, and the willingness of other countries to hold US debt helps maintain the value of the US dollar.
This leads to some challenges. There was a social contract where the US bought goods from all over the world, well the non-sanctioned world, and economic actors were willing to take US dollars/debt in exchange because they had a willing market in the US. Trump is ending that, or at least making it less profitable for countries to export to the US. This will make it harder to pay off US investments in their countries.
@TimD,
Well put.
Worth noting that in 1944 (Bretton Woods Conference) the US had long been running trade surpluses leading to a international settlement crisis on the gold standard and the Great Depression. In 1944 US trade deficits were likely unimaginable. With great wealth comes great power which leads to even greater hubris. History does not repeat itself but it does rhyme. So, 1944 rhymed with 1919 and US de-industrialization rhymed with Britain’s economic migration from manufacturing to retail and finance.
Yves,
Now you are singing my song. Bancor might have worked in 1944 had US bankers not had the political influence to block it, but now far too much bridge has gone under the water for any voluntary action to navigate this change. After a global economic collapse such a solution might be architected in the next brave new world, but it will be consequences of carbon based fuels that causes that collapse rather than the tenuous position of a sovereign reserve currency. Keynes had a great mind but lived in a mediocre world.
Thanks for the kind words but the issue really was not bankers but national sovereignity. The US did not want to cede power to a some sort of supranational authority that could require currency revaluations and impose massive fines.
Sorry Yves, but I am far more cynical than that.
Can you explain Wilson in 1919 without the influence of “bankers” (euphemistically as the owners of capitalist assets of all kinds)? Keynes and a few others foresaw the next war in the shadow of the “Economic Consequences of the Peace” from the Great War. The biases of rentier capitalism are systemic. They provide a convenient escape from the responsibilities of labor relations and localized environmental impact: too bad about climate change though. Besides one cannot achieve political power without campaign financing.
Financialization was a feature rather than a bug. JP Morgan would be proud. National sovereignty just as national security is more often simply a beard for politicians serving the interests of the 0.001% rather than an ideological motive in and of itself. Fortunately for US politicians they have real issues of national sovereignty and national security coming out of the quasi-communist authoritarian states that make our excesses seem virtually altruistic in comparison.
Besides that, the name of your blog is Naked Capitalism.
For so long as an establishment liberal vs a troglodyte sociopath defines the limits of our choices for POTUS then there is no solution for the socioeconomic problems of our nation. My wife and I just discussed how this the fate for our children, but we yet have hope that our grandchildren may do better than this.
BTW, POTUS was never intended to be all powerful but rather has always been iconic and emblematic of the contemporary political reality of the US polity.